Timothy J. Coburn - Page 4

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               As of April 15, 1997, the collateral had an aggregate market           
          value of approximately $750,000, which represented 120 percent of           
          the outstanding principal due on the promissory note.3  At the              
          request of CareMatrix, petitioner delivered the loan documents to           
          CareMatrix’s counsel.  On or about May 29, 1997, CareMatrix took            
          possession of the loan documents and the stock certificate for              
          the collateral from its counsel.                                            
               The promissory note became due and payable on April 15,                
          2000, at which time the outstanding principal and interest due              
          was $746,376.52.  CareMatrix subsequently demanded payment, but             
          petitioner refused to pay, alleging that the promissory note was            
          nonrecourse and that CareMatrix held the collateral.  CareMatrix            
          made no further collection efforts.                                         



               3The parties stipulated the following with respect to the              
          value of the collateral as of Apr. 15, 1997:  “Pursuant to the              
          Note, the shares pledged had an aggregate market value of 120% of           
          the principal borrowed - approximately $750,000.00.”  As noted              
          above, petitioner appears to have taken a basis in the CareMatrix           
          and PhyMatrix stock equal to the value of the PhyMatrix and                 
          CareMatrix stock at the time the stock was received by petitioner           
          during 1996.  However, the record provides no evidence that the             
          value of the PhyMatrix stock was the same on April 15, 1997 (the            
          date of the loan transaction) as it was on the date that the                
          stock was transferred to petitioner during 1996.  Because the               
          value of the collateral may have fluctuated from the date that              
          petitioner received the PhyMatrix stock until the date that                 
          petitioner pledged the PhyMatrix stock as collateral, the                   
          aforementioned stipulation as to the value of collateral on                 
          Apr. 15, 1997, is insufficient to establish petitioner’s basis              
          in the collateral on that date.  Consequently, we are unable to             
          determine from the record petitioner’s basis in the collateral.             






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